Analysts reckon Aquarius is a logical buyer of platinum assets in the South African sector where consolidation is starting.
http://www.miningmx.com/platinum/810044.htm
Aquarius grows cash as output falters
Allan Seccombe Posted: Thu, 26 Apr 2007 [miningmx.com] -- AQUARIUS Platinum grew its cash by $79m in the March quarter despite a nine percent fall in attributable platinum group metal (PGM) ounces. Labour shortages and holidays in South Africa and equipment failure in Zimbabwe were blamed by Aquarius Platinum for lower output.
Aquarius now has $343m cash on its books, of which it will spend R342.5m to buy back a 3.5% stake held in the company by empowerment partners, the Savannah Consortium this month. This is after receiving approval from South Africa's Department of Minerals and Energy for the deal.
"The commodity prices mask some challenging operating conditions, with production falling in the traditionally dull third quarter due to seasonal issues, industrial relations and geological conditions," CEO Stuart Murray said in a statement accompanying the group's third quarter results.
Cash profit shot up 118% to $58m. Attributable PGM production fell nine percent from the previous quarter to 124,577 oz.
Costs rose across the board at the South African operations, with cash costs per run of mine tonne increasing between six percent at Kroondal to 32% at Marikana because of the holidays and labour hiccups.
"Aquarius's costs have risen and production has fallen below our forecasts and we therefore expect to reduce our forecasts. The company has, however, been benefiting from continued strong PGM and other metal prices," said Marc Elliott, an analyst at Numis Securities.
Numis values Aquarius at 1159p/share on a discounted cash flow basis using an 8% discount factor.
"Despite its involvement in PGMs, which we view as having long-term strength, we think that the operations are overvalued hence our sell recommendation. We recognise that PGM miners are commanding a premium, but are unconvinced that this is justified, particularly in light of the political risk to which many PGM miners are exposed with regard to their base of operations," Elliott said, citing South Africa and Zimbabwe.
Analysts reckon Aquarius is a logical buyer of platinum assets in the South African sector where consolidation is starting.
A complication, however, is that Aquarius Platinum is not an empowerment company and therefore not necessarily favoured as a partner. This, and a need to press on with production growth after 2008/09, was behind its recent bid to merge with LionOre Mining International before it was taken out by Xstrata.
In fact, there’s a view that Aquarius will start drifting from around 2008, when production at its mines will be at full tilt and total production will plateau at about 700,000 oz/year. “In order to cement its place as a mid-tier platinum producer Aquarius needs to continue growing production,” said Morgan Stanley in a report dated February 2.
"The group’s success in maintaining strong growth momentum will be the key, in our view, to the share’s future rating,” said Steve Shepherd, an analyst for JP Morgan in a report last month. “Without that we think the share performance will be constrained relative to peers,” he wrote.
SLV Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
